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Reconceptualizing the Firm in a World of Outsourcing and Offshoring: The Organizational and Geographical Relocation of High-Value Company Functions
Abstract
In the largest sense, global strategy amounts to (1) the optimal disaggregation or slicing of the firm's value chain into as many constituent pieces as organizationally and economically feasible, followed by (2) decisions as how each slice should be allocated geographically (‘offshoring’) and organizationally (‘outsourcing’). Offshoring and outsourcing are treated as strategies that need to be simultaneously analysed, where just ‘core’ segments of the value chain are retained in-house, while others are optimally dispersed geographically, as well as dispersed over allies and contractors. This amounts to a reconsideration of the nature of the firm that captures the dynamic changes in global configuration and a reconsideration of what constitutes ‘core’ activities that need to be retained internally. The article proposes a new research agenda that searches for each firm's optimal degree of disaggregation and global dispersion given that further scattering of value chain activities entail benefits as well as increased complexity and costs.

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  • References (51)
  • Cited By (299)
Jay B. Barney56
Estimated H-index: 56
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William S. Hesterly16
Estimated H-index: 16
PART ONE: The Tools of Strategic Analysis Chapter 1 What Is Strategy and the Strategic Management Process? Chapter 2 Evaluating a Firm's External Environment Chapter 3 Evaluating a Firm's Internal Capabilities PART TWO: Business Level Strategies Chapter 4 Cost Leadership Chapter 5 Product Differentiation PART THREE: Corporate Strategies Chapter 6 Vertical Integration Chapter 7 Corporate Diversification Chapter 8 Organizing to Implement Corporate Diversification Chapter 9 Strategic Alliances Chap...
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Pankaj Ghemawat33
Estimated H-index: 33
(Harvard University)
Why do so many global strategies fail--despite companies' powerful brands and other border-crossing advantages? Seduced by market size, the illusion of a borderless, "flat" world, and the allure of similarities, firms launch one-size-fits-all strategies. But cross-border differences are larger than we often assume, explains Pankaj Ghemawat in Redefining Global Strategy. Most economic activity--including direct investment, tourism, and communication--happens locally, not internationally. In this ...
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Farok J. Contractor24
Estimated H-index: 24
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Peter Lorange4
Estimated H-index: 4
Introduction. Alliance Structure and Performance: Theoretical Overviews. Do Companies Gain Experience in Managing Cooperative Relationships? Learning across the Interorganizational Membrane. The Role of Trust and Goodwill in Cooperative Relationships. The Role of Knowledge in Alliance Management. A Social Exchange Perspective to Interfirm Linkages. Cooperation for Innovation and R&D Partnerships. The Organization of Interfirm Relationships in the New Alliance-Based Economy. Alliance Structure an...
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2005 in Harvard Business Review [IF: 4.37]
M Gottfredson1
Estimated H-index: 1
,
R Puryear1
Estimated H-index: 1
El liderazgo es distinto de la gestion, pero no por las razones que cree la mayoria de las personas. El liderazgo no es algo mistico ni misterioso. No tiene nada que ver con tener carisma o algun rasgo de la personalidad exotico. No es el territorio de unos pocos elegidos. Tampoco el liderazgo es necesariamente mejor que la gestion o un reemplazo de ella. Mas bien, el liderazgo y la gestion son dos sistemas de accion complementarios y distintos, afirma John Kotter en este articulo publicado por ...
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2000 in European Management Journal [IF: 2.37]
Charles Baden-Fuller29
Estimated H-index: 29
,
David Targett3
Estimated H-index: 3
(Imperial College London),
Brian Hunt2
Estimated H-index: 2
(Imperial College London)
Based on a case study approach, the authors examine the question: are there some aspects of a company's core business which can and should be outsourced? This question challenges traditional models of strategy which maintain that outsourcing of core activities is risky. Four circumstances are identified for outsourcing and examined in detail. The arguments and case studies suggest a number of lessons for managers and a general conclusion reached which supports the view that the outsourcing of co...
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Ram Mudambi42
Estimated H-index: 42
(Temple University),
Markus Venzin9
Estimated H-index: 9
(Bocconi University)
One important effect of the increasing integration of the world economy is the rising importance of possibilities to offshore and outsource value-creating activities. In many industries, firms are able to disaggregate their value chains into smaller parts. This process allows for a less path-dependent approach to the firm's ideal location profile (through offshoring and relocation) and control strategies (through outsourcing). This article argues that optimal decisions regarding individual proce...
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James Brian Quinn21
Estimated H-index: 21
Today's knowledge- and service-based economy offers companies a chance to increase profits through strategic outsourcing of intellectually based systems. As companies disaggregate intellectual activities internally and outsource more externally, they approach true virtual organization with knowledge centers interacting largely through mutual interest and electronic ? rather than authority ? systems. In this article, Quinn outlines an integrated knowledge and outsourcing strategy that can mitigat...
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Karl P. Sauvant18
Estimated H-index: 18
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Christoph Grimpe16
Estimated H-index: 16
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Ulrich Kaiser17
Estimated H-index: 17
(University of Zurich)
The outsourcing of research and development (R&D) activities has frequently been characterized as an important instrument to acquire external technological knowledge that is subsequently integrated into a firm's own knowledge base. However, in this paper we argue that these ‘gains’ from R&D outsourcing need to be balanced against the ‘pains’ that stem from a dilution of firm-specific resources, the deterioration of integrative capabilities and the high demands on management attention. Based on a...
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Richard Florida52
Estimated H-index: 52
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  • Cited By (299)
Y.L.R. Moorthi1
Estimated H-index: 1
(Indian Institute of Management Bangalore)
Abstract India-centric IT services companies (major among them being the SWITCH companies -- Satyam, Wipro, Infosys, TCS, Cognizant and HCL) grew rapidly for more than a decade by providing low cost, high quality business process and IT outsourcing services. With the bigger companies already crossing the 100,000-employee mark, they are now turning their attention to non-linear revenue (i.e. revenue less dependent on the number of employees or greater revenue earned per employee). For this, they ...
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Begoña Fuster García2
Estimated H-index: 2
,
Carmen Mora21
Estimated H-index: 21
This paper studies the offshoring of services and whether this phenomenon is linked to the international fragmentation of activities or to a shift in outsourcing to foreign rather than domestic suppliers. Analysis is performed using the National Accounting input-output tables of Spain’s National Institute for Statistics for the 2000-2007 period. The major findings reveal growth in the offshoring of intermediate services to foreign countries by service providers and manufacturing companies, with ...
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Christian Koch19
Estimated H-index: 19
(Chalmers University of Technology),
David Bennett20
Estimated H-index: 20
Global sourcing of engineering is becoming a more common way to increase a company’s competitiveness and includes the nearshoring and offshoring strategies of relocating engineering services and activities across national borders.. The driving force of why nearshoring and offshoring can often lead to competitive advantage is the combination of cost reduction and the opportunity of exploiting competent resources. Several emerging countries in Europe offer high quality engineering at a lower cost ...
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Edgar Bellow (Reims Management School)
The problem of climate change is becoming increasingly prevalent in the business context. Risks such as increased risk of extreme weather events and the attendant loss of production site facilities, and changes in population density and migration patterns, may seem remote from the business offshoring decision. However, it is in fact highly relevant, as the recent case of flooding in Thailand and its effects on the global hard drive industry shows. The discussion in this chapter focuses on the ri...
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Giulio Buciuni2
Estimated H-index: 2
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Giancarlo Coro8
Estimated H-index: 8
,
Stefano Micelli12
Estimated H-index: 12
Manufacturing industries in developed countries have been experiencing profound changes over the last decade. Production of inputs and commodity goods has been increasingly outsourced to emerging countries’ low-wage suppliers, thus nurturing an unprecedented process of ‘global shifts’. Departing from the acknowledgment of this fast-changing scenario, we raised the question of whether operation can still play a role in the economic development of Western industries. While industrial statistics co...
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Stephen Tallman25
Estimated H-index: 25
(University of Richmond)
8 Citations Source
Markus Helfen7
Estimated H-index: 7
(Free University of Berlin)
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Lydia Bals12
Estimated H-index: 12
(Copenhagen Business School),
Kyra Kneis1
Estimated H-index: 1
(Bayer),
Christine Lemke1
Estimated H-index: 1
(Bayer)
... more
Although R&D is at the core of knowledge-intensive industries like Pharma, outsourcing parts of its activities hold considerable efficiency and effectiveness potentials. That means managers must understand, which R&D activities can be outsourced and which need to stay in-house in order to ensure competitiveness. Nevertheless, systematic approaches for understanding the finer details of the decision-making process on R&D outsourcing are lacking. To address this gap, we present a framework develop...
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Petra Edoff1
Estimated H-index: 1
Offshoring is a hot topic in the industrial and academic community over the last few years, evolving from a focus on manufacturing to product development and R&D. Offshoring refers to the proce ...
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Klaus-Dieter Gronwald1
Estimated H-index: 1
(Mahindra Satyam)
The common understanding of global sourcing as a procurement centric task of companies to resolve shortage of talents in the context of established offshoring and outsourcing models will be reviewed for product sourcing and service sourcing separately. Understanding offshoring as a location-specific delivery model and outsourcing, on the other hand, having significant impact on the governance, delivery system and the companies’ organisation (onsite or offshore), global sourcing is seen as a comb...
1 Citations Source Cite

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